News

Glitnir hf. creditor group submits amended proposal for stability contribution

10/20/15

A group of Glitnir hf. creditors has prepared amendments to its previous proposal, submitted by letter on 8 June 2015, concerning Glitnir's stability contribution to the State in connection with the comprehensive capital account liberalisation strategy announced that same day. In a letter received by the Minister of Finance and Economic Affairs today, these same Glitnir creditors propose that Glitnir's entire holding in Íslandsbanki be transferred to the State, which would then become full owner of the bank.

On 8 June 2015, the Ministry of Finance and Economic Affairs published proposals from a group of Glitnir hf. creditors and their advisors concerning measures to facilitate the conclusion of Glitnir's winding-up proceedings. The aim of the measures was to neutralise the risk posed to the balance of payments by the settlement of the estate's domestic assets. The proposals were presented following consultation between the creditors and members of the Task Force for Capital Account Liberalisation. Since then, the Glitnir winding-up board has developed the proposals further, with support from creditors. Since this summer, the authorities have been examining the original proposals with the aim of assessing whether they fulfil the authorities' published stability conditions.

Glitnir creditors' advisors and the Task Force held meetings between 25 September and 13 October to review the proposals from 8 June. Following those meetings, the same Glitnir creditors presented the revised proposals to the Minister of Finance and Economic Affairs, who chairs the Steering Committee for Capital Account Liberalisation. The main amendments to the proposals are as follows:

  • As part of the stability contribution, Glitnir will relinquish to the authorities all of its shares in ISB Holding ehf., which owns 95% of shares in Íslandsbanki hf. Íslandsbanki's equity totalled about 185 b.kr. as of end-June 2015. As a result of the amendments, the following provisions of the original proposals from Glitnir creditors are no longer included:
  • A profit-sharing agreement concerning returns on Íslandsbanki shares;
  • A contingent bond in the amount of 119 b.kr.;
  • Íslandsbanki's foreign-denominated dividend payment to Glitnir, in the amount of 16 b.kr., and other planned dividend payments.
  • According to the above-described proposal, the transfer of liquid assets, cash, and cash equivalents will be reduced by 16 b.kr. because of the proposed foreign-denominated dividend to Glitnir, which will not be paid, and 36 b.kr. due to other changes provided for in the amended proposal from the Glitnir creditors. The conversion of Glitnir deposits to foreign currency at Íslandsbanki in a standard bond issue will be based on a special agreement between Glitnir and Íslandsbanki. Glitnir will pay for and acquire the Treasury's facility to Íslandsbanki, which was granted in the form of a subordinated foreign-denominated bond at face value plus payment of accrued interest.

The Task Force for Capital Account Liberalisation is of the view that the measures described in the above-mentioned letter conform to the stability conditions as formulated and that, assuming the measures are carried out, the assessment of the Task Force is that the conditions for an exemption from the capital controls have been met.

The above-described measures are subject to the same assumptions as were specified in the proposals of 8 June 2015, including an exemption from the Foreign Exchange Act, no. 87/1992, which will authorise Glitnir to conclude its winding-up proceedings without payment of the stability tax.